miles per gallon

Take a look at the above fuel efficiency label? Can you understand it? Do you think other people can?

Last week, the Environmental Protection Agency releasedtwo optionsfor replacing the current fuel efficiency stickers displayed on new car windows. Before releasing these options, the EPA conducted an online survey and sixteen focus groups held around the country, theresults of which the Nudge blog has been looking through.

Hopefully, you first noticed the two numbers at the bottom of the label, 4.5 and 3.3. Unless you’re buying a Ferrari, those probably seem too low for a standard miles-per-gallon statistic, right? You look closer and notice that they aren’t MPG numbers at all; they are GPM (gallons per mile) numbers.

GPM is a statistic in the news, thanks to work on the MPG Illusion, which shows that people misunderstand the non-linear relationship between gallons of gas consumed and distance traveled. One of the major implications of this research is that it obscures the value of improvements as fuel efficiency improves. People tend to undervalue small mpg improvements on inefficient gas guzzlers, and overvalue large jumps between two fuel sippers, like a Honda Civic and a Toyota Prius.

There have been many proponents of a new GPM metric, and the New York State Senate recently passed a law requiring it in car dealership showrooms. As part of its research, the EPA investigated consumer response to the concept. For the moment, the EPA found that consumers struggle with the MPG illusion, even when it is explained to them. For those who were able to understand the concept, they still expressed a preference for MPG over GPM because they were used to thinking in MPG terms. The EPA concluded:

It may be said that understanding the MPG illusion is extremely difficult to achieve and does not necessarily lead people to switch to a different type of vehicle nor does it make them prefer gallons per 100 miles over MPG. In essence, people prefer familiarity over facts.

Focus group respondents found the label shown above particularly confusing, not just because of the GPM statistic, but because it is presented in the slider in the upper right-hand corner with a range of 2 (best) to 10 (worst). Without a general knowledge of gas guzzler and hybrid GPMs, the scale made little sense. In the end, the EPA decided to continue using MPG estimates as the primary fuel consumption statistic. “If there is a desire to introduce ‘gallons per 100 miles’ estimates,” the agency concluded, “do so in a way that positions it as additional information and use the same font size for presenting the MPG and gallons per 100 miles information.”

A new fuel efficiency bill passed by the New York State Senate includes a provision for helping drivers think in “gallons per 1,000 miles” (GPM) instead of the traditional miles per gallon (MPG).

The idea is originally the brain child of Richard Larrick and Jack Soll who blogged about it earlier. Larrick and Soll’s original proposal called for gallons per 100 miles driven, but they fully endorse the New York Senate bill, which would require car dealers to put up a poster in their showrooms with a conversion chart showing consumers how to calculate GPM.

1. 1,000 miles is roughly what the average American drives in a month, so it is a meaningful number

3. It avoids the problem of seemingly small differences in efficiency that occurs when comparing “gallons per 100 miles”

In New York, the heavy lifting on the bill, the first of its kind in the U.S., was done by Senator Daniel Squadron. Reached by phone after the bill passed 35-26, Squadron said he was laughed at on the floor of the Senate by some opponents. “Folks had a difficult time telling why this is necessary,” he said. “They said this (gas mileage) information already exists, why would anyone need it? They can do the conversion themselves.”

Apparently, there are many assembly members who think New York state is full of Econs.

A similar bill exists in the state’s Assembly. Squadron said there is some momentum for it, but that lots of work still needs to be done. “We’re hopeful,” he said.

Richard Larrick, who guest blogged for us, points to a graph from The Green Grok showing gas money savings for mpg improvements over 1,000 miles at three fuel efficiency levels. They equate to driving a Jeep SUV (red), a Camry (blue), and a Civic (green). The figure assumes $4 per gallon gas.

You can also watch Larrick and co-author Jack Soll in this spot produced by Duke University.

Understanding miles per gallon seems so easy. Richard Larrick and Jack Soll of Duke University’s Fuqua School of Business explain why the concept trips up most of us. The duo recently published a paper in Science titled “The MPG Illusion” that has received a national media attention (listen to the Science podcast here.). For a taste of the research and a test of your fuel efficiency expertise, take this quiz.

The Nudge blog invited Larrick to write a post summarizing his findings (with a more in-depth description of the three studies he and Soll conducted), and clearing up major misconceptions about his research that have been reported in the press. We are delighted to have him share his thoughts.

About

The Nudge blog is the online companion to Richard Thaler and Cass Sunstein’s “Nudge: Improving Decisions About Health, Wealth, and Happiness.” Here you’ll find much more about nudging, choice architecture, libertarian paternalism, and many other terms you won’t read about in standard economics books.

Cass Sunstein is currently the Administrator of the White House Office of Information and Regulatory Affairs and has no affiliation with the Nudge blog.

The Nudge blog is edited by John Balz.

Tell us about a nudge

The possibilities for great nudges are everywhere. For a list of favorites from the book, check out our dozen nudges. We invite readers to send their own nudge suggestions to nudgeblog@gmail.com.

What is Choice Architecture?

Decision makers do not make choices in a vacuum. They make them in an environment where many features, noticed and unnoticed, can influence their decisions. The person who creates that environment is, in our terminology, a choice architect. The goal of Nudge is to show how choice architecture can be used to help nudge people to make better choices (as judged by themselves) without forcing certain outcomes upon anyone, a philosophy we call libertarian paternalism. The tools highlighted are: defaults, expecting error, understanding mappings, giving feedback, structuring complex choices, and creating incentives.

For a user-friendly introduction to choice architecture, check out this paper.